Monthly Archives: July 2010

Higher enhanced UK annuity rates

Did you realise you could get higher enhanced UK annuity rates for various reasons, and not just because of your state of health? Admittedly, higher annuity rates are available to those who suffer from more serious medical conditions, and rates up to 50% higher aren’t uncommon. However, you can get higher rates if you’re overweight, if you smoke, or if you consume alcohol on a regular basis. Your occupation whilst at work and your address can also lead to higher annuity rates.

As examples of higher enhanced annuity rates, diabetes can result in rates up to 30% higher, whereas obesity can lead to rates up to 10% higher. If you happen you live in a poorer postcode area, perhaps around Glasgow, you could get rates up to 10% higher. If you’re unfortunately suffering from a severe form of cancer you could double your annuity income. The important thing to do is to be prepared to mention anything about your health or lifestyle that might effect the rates you’re offered.

Will you still have to buy a pension annuity?

Will you still have to buy a pension annuity when you reach retirement? The crucial question is, how much pension will be deemed sufficient to prevent the individual retiree from falling back on State benefits and how big a lump sum will they need to actually provide this? Until we know and understand all this fully we won’t really know who still has to buy a pension annuity for their all important retirement income. Millions of individuals do not have a complete National Insurance record and not nearly everyone earned enough to qualify for earnings related pensions, so it’s difficult to really put a framework round this.

It is likely that under the new rules, all these individuals will be obliged to use their pension savings first to purchase a pension annuity in order that they do not qualify for any particular State benefits before they are eligible to withdraw money from their hard earned pension fund. Roughly speaking a couple will need to have an income in retirement of somewhere around £10,500 a year, roughly the level at which they are no longer eligible for Pension Credit, before the new rules will be allow them to take any money from their pension fund. What is likely, however, is that these changes will largely benefit wealthier individuals. These changes might therefore be a positive step forward, but only for a select few individuals.

Many will still have to rely on the best UK annuity rates

Despite what you may have read, many people will still have to rely on the best UK annuity rates. While the government’s plans to abolish the requirement to use pension fund savings to purchase an annuity by age 75 at the latest is welcome news, the reality is that for the vast majority of retirees, nothing much will change. The new rules will require everyone to ensure that they have a minimum income in retirement which is sufficient to prevent them from becoming a burden on the State. Some 90% of annuities are purchased with pension funds of £50,000 or less, which would just about provide sufficient retirement income to prevent the individual from qualifying for State benefits.

Most people will therefore still be forced to purchase an annuity, hopfuly with high UK annuity rates. Those who will benefit from the changes are the wealthy who will be obliged to provide this minimum pension, but will be free to do what they like with the balance of their pension fund. The new rules will give pension savers the choice of having ‘capped drawdown’, which allows people to choose how much money to take annually from their pension fund throughout their retirement, or whether to draw any income at all. This is pretty much as income drawdown operates today. The alternative will allow people to take more than this ‘capped’ limit or even withdraw all the fund in cash, provided this will leave them with sufficient pension income that they will not themselves become a burden on the State. Savers will also have the option of leaving any unused pension fund monies to their children or other beneficiaries, albeit with a tax charge expected to be a hefty 55%.

Use the open market option for the best annuity rates

I’ve just seen an article on TV about annuities. It said you should use the open market option for the best annuity rates for your retirement income. Annuities quotes from the open market will include all the different annuity providers and not just a single provider or a panel of providers. It will also include specialist providers who excel in the area of ill health. To use the open market option and get you annuity quotes is very simple. We recommend that you use a specialist annuity desk such as this that transacts this type of business each and every day and will be able to guide you all the way through the process.

What exactly is the annuity quote process? It starts with asking questions about the shape of annuity you require for your circumstances. The shape is the options that you might want built into your annuity. There are several: a continuing pension for your spouse or civil partner, a guarantee payment period, escalation in payment to protect against ongoing inflation, and value protection which pays out any unpaid pension fund monies on death before age 75. but there is a tax charge of 35%. Once you have chosen the shape then annuity quotes can be prepared to match using the open market option. It should be pointed out that each of the options chosen will actually reduce the amount of income from a standard single life annuity that doesn’t have any options.

UK pension annuity rates are all about life expectancy

To get the best annuity rates you need to understand UK pension annuity rates are all about life expectancy. When you buy an annuity with your hard saved pension fund, you’re actually buying a guaranteed income for the rest of your life. So it’s important you shop around to find the best deal and understand why. Annuity rates are based on various factors, and this can lead to to you receiving a substantially higher retirement income. However, to find the best deal you really need to compare annuity quotes from different companies. It’s possible you could get up to 30% more retirement income than you would receive from your current pension provider. So, don’t simply waive goodbye to thousands of pounds of vital retirement income, enquire now to see how much extra income we can find for you.

UK annuity rates are based on various factors: your age, gender, size of pension fund, occupation, your health, if you’re overweight, if you smoke regularly, your alcohol consumption, and where you live. The more factors that apply to you, the higher your retirement income. To achieve the best deal at retirement you need to be prepared to disclose any details about your state of health or your lifestyle that might effect the annuity rates you’re offered. The more you disclose, the higher your retirement. Why is this? Because annuity rates are all about life expectancy. If your particular circumstances suggest a lower than average life expectancy, you’ll get a higher income, because the annuity provider will anticipate paying you that income for a shorter period of time.

Pension annuities; is a flexible pension annuity the answer

A lot has been said about pension annuities; is a flexible pension annuity the answer to many people’s concerns. According to enhanced annuity rates provider, MGM Advantage, around 40% of non-retired adults believe that the amount of annuity income they will require as they progress through their retirement will increase. This rises to nearly half of non retired adults aged 55 to 64 years. Just over 22% expects their retirement income requirements to remain the same throughout, while 23% expect them to somehow decrease throughout retirement. Finding suitably flexible annuity products that can meet these changing needs in retirement becomes even more important.

Aston Goodey, of MGM Advantage comments that while it is encouraging that more people are aware of the impact that inflation will have on their annuity income, it is a particular concern that so many have no intention of seeking professional advice. Many people still have unrealistic expectations of the retirement lifestyle they would like to expect and afford. The reality could be very different, particularly if people take the pension annuity income offered by their existing pension provider rather than shopping around for the best annuity rates using the open market option.

He added that another way that people can enhance the level of annuity income they receive in retirement is to select a that maintains exposure to the stock markets. While it does involve some risk, a retirement product like this also has a better chance of generating upside returns, negating the impact of ongoing inflation. MGM Advantage believes that a growing number of retirees will need to keep more of their assets exposed to the stockmarkets, and that this will fuel strong growth for the asset backed pension annuities.

Will the best pension annuity rates be enough

Will the best pension annuity rates be enough for the many millions of people in retirement? Around 14.5 million people expect their income needs to increase through retirement, so no. A quarter of non-retired adults have not started to plan their retirement income just yet, but 20% (6.4 million) non-retired adults will not seek professional financial advice on their retirement needs. New research reveals that 60% of non-retired adults are concerned about the effect that inflation will have on their future income in their retirement, but over six million will not bother to seek professional advice. The survey from retirement specialist MGM Advantage illustrates that concerns over the impact of inflation rises to 70% of non-retired adults aged 45 to 54 and to 78% for those aged 55 to 64 years.

The latest Inflation Report coming out from the Bank of England states that economic conditions remain uncertain in the near future while in January there was the biggest year on year hike in the Consumer Price Index (‘CPI’) since records began. MGM Advantage warns that this is already having a dramatic impact on the income available to those people in retirement and that the situation could get worse unless those nearing retirement take steps to do something about it. Getting the best annuity rates will help a little.

Compulsory annuity purchase will remain for most

Compulsory annuity purchase will remain for most, despite the supposed biggest shake-up of pensions in a generation that on first read will allow millions of retired people to dip into their pension fund as and when they like. And it will be made easier for the elderly who die with a large sum of unused pension fund to pass it on free of Inheritance Tax, the Government has announced. Plans to scrap laws that force pensioners to buy an annuity have been confirmed.

Laith Khalaf, of Hargreaves Lansdown, said that the Government is making pensions more attractive to encourage people to save more for our retirement. Many people do not want to buy an annuity because that means their pension fund monies are effectively gone for ever. People don’t like the thought of dying 10 days later and having an insurance company gobble up the pension fund they built up over many years, he added.

Last year, life insurance companies sold £11billion worth of annuities. They provide an income and must be bought before the purchaser reaches the ripe old age of 75. A 65-year-old man with a £100,000 pension fund would get an income around £550 a month from his annuity purchase. However, if he was to die three months after taking it out he would have had only three months income, and the unused amount would be the insurance company’s. The new rules will stop this situation. Instead, retirees with a pension income of at least £10,000 a year will be able to draw down as much income as they want from their fund. Below £10,000, amounts will actually be capped. Currently, if someone aged over 75 dies with at least £100,000 in their pension pot, that amount is subject to tax at 82%; under the new system, anyone inheriting a pension pot will pay only a 55% per cent “recovery charge” which they can escape by taking it as income instead.

Philip Brown, of Partnership, said that there is some extra flexibility in these plans, but, in reality, only a few more wealthy people with enough money put aside will benefit. The remainder will still look to buy an annuity for their retirement income; the 7.8 million workers saving into defined contribution money purchase schemes and millions more who are likely to join them as final salary arrangements are killed off.

Compulsory annuity purchase changes

The Government wants to foster a new culture of saving in the UK with compulsory annuity purchase changes. The Treasury secretary, Mark Hoban, has suggested new rules supposedly helping the vast majority of people who buy an annuity at retirement for their income secure the best possible deal? Or has he put an end to the requirement to have to buy an annuity at 75, giving the tiny minority who want to leave their pension fund invested at 75 the ability to do so?

There are merits in both, but the Government aren’t addressing the first option, but the second, aimed at a wealthy minority. Currently the only option at 75 other than buying an annuity is an alternatively secured pension (or ASP), which attracts 82% tax on death. That will now be replaced with a form of capped drawdown, with an annual withdrawal limit, aa well as uncapped drawdown for those with a certain income level. It certainly isn’t pensions simplification. No, we’re going to see more confusion and chaos. The Treasury’s own figures show that just 5,000 people aged between 55 and 75 will be affected by this proposed change, that’s just 1% of retirees, with the average UK pension fund at retirement worth less than £30,000.

Surely the Government should turn its attention to the 99% of retirees not affected by all this, for whom buying an annuity is the only viable option. It’s estimated that less than 40% of retirees actually use the open market option (OMO) to shop around for the best annuity rates at retirement, staying instead with their existing pension provider. For most this means waving goodbye to thousands of pounds of vital income. However, the Government has not yet deemed this massive issue worthy of the scrutiny afforded to the age 75 annuity purchase issue. Realistically, making the OMO the default option at retirement is needed if the pension system is going to work fairly for the vast majority of retirees who still rely on buying an annuity.

An end to compulsory annuity purchase

The Government announced recently that they had plans to put an end to compulsory annuity purchase. This is the requirement for people with private pension plans to convert their savings into an income with an annuity by age 75. It looks at first sight like a good idea. However, this reform will be of use to only a tiny handful of very wealthy retirees who can actually afford to continue taking investment risks with their hard earned pension funds during old age. One change; while retirees with annuities are unable to pass on pension funds to their dependants, those who avoid buying a guaranteed income will be able to do so, albeit subject to a pretty hefty tax charge.

No, what’s really needed is to stop tinkering around with all this, and change the rules regarding the open market option. Make it the default option when it comes to annuity purchase. That means everyone will know they can shop around for a better deal and a higher retirement income. This will improve the financial position of the retiree, put less of a burden on the State, and, unfortunately, increase tax revenues for the Government. Everyone wins.

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